This study examines the mechanisms underlying long-run reductions in energy consumption caused by a widely studied social nudge. Our investigation considers two channels: physical capital in the home and habit formation in the household. Using data from 38 natural field experiments, we isolate the role of physical capital by comparing treatment and control homes after the original household moves, which ends treatment. We find 35 to 55 percent of the reductions persist once treatment ends and show this is consonant with the physical capital channel. Methodologically, our findings have important implications for the design and assessment of behavioral interventions.

Social Contagion of Ethnic Hostility Michal Bauer, Jana Cahlikova, Julie Chytilova and Tomas Zelinsky (tomas.zelinsky@tuke.sk) CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague Abstract: Ethnic hostilities often spread rapidly. This paper investigates the influence of peers on willingness to sacrifice one’s own resources in order to cause harm to others. We implement a novel experimental design, in which we manipulate the identity of a victim as well as the social context, by allowing subjects to observe randomly assigned peers. The results show that the susceptibility to follow destructive peer behavior is great when harm is caused to members of the Roma minority, but small when it impacts co-ethnics. If not exposed to destructive peers, subjects do not discriminate. We observe very similar patterns in a norms elicitation experiment: destructive behavior towards Roma is not generally rated as more socially appropriate than when directed at co-ethnics but norms are more sensitive to social contexts. The findings can help to explain why ethnic hostilities can spread quickly among masses, even in societies with few visible signs of systematic inter-ethnic hatred, and why many societies institute hate crime laws.

Here's a TED first: an animated Socratic dialog! In a time when irrationality seems to rule both politics and culture, has reasoned thinking finally lost its power? Watch as psychologist Steven Pinker is gradually, brilliantly persuaded by philosopher Rebecca Newberger Goldstein that reason is actually the key driver of human moral progress, even if its effect sometimes takes generations to unfold. The dialog was recorded live at TED, and animated, in incredible, often hilarious, detail by Cognitive.

Before doing so, executives should ask themselves two sets of questions. Good managers—even great ones—can make spectacularly bad choices. Some of them result from bad luck or poor timing, but a large body of research suggests that many are caused by cognitive and behavioral biases. While techniques to “debias” decision making do exist, it’s often difficult for executives, whose own biases may be part of the problem, to know when they are worth applying. In this article, we propose a simple, checklist-based approach that can help flag times when the decision-making process may have gone awry and interventions are necessary. Our early research, which we explain later, suggests that is the case roughly 75 percent of the time. Biases in action In our experience, two particular types of bias weigh heavily on the decisions of large corporations—confirmation bias and overconfidence bias. The former describes our unconscious tendency to attach more weight than we should to information that is consistent with our beliefs, hypotheses, and recent experiences and to discount information that contradicts them. Overconfidence bias frequently makes executives misjudge their own abilities, as well as the competencies of the business. It leads them to take risks they should not take, in the mistaken belief that they will be able to control outcomes. The combination of misreading the environment and overestimating skill and control can lead to dire consequences. Consider, for instance, a decision made by Blockbuster, the video-rental giant, in the spring of 2000. A promising start-up approached Blockbuster’s management with an offer to sell itself for $50 million and join forces to create a “click-and-mortar” video-rental model. Its name? Netflix. As a former Netflix executive recalled, Blockbuster “just about laughed [us] out of their office.”1 Netflix is now worth over $25 billion. Blockbuster filed for bankruptcy in 2010 and has since been liquidated.

“ Why You Should Bet Against Your Candidate When your favorite sports team is defeated, you’re disappointed, even dismayed. The same is true when your preferred political candidate doesn’t win. It hurts when your side loses. Fortunately, you can insure yourself against such unhappiness: just place a bet for your side to lose. This strategy, which…”
Via Alessandro Cerboni

Nudge for good: How insights from behavioral economics can improve the world— and manipulate people | Source: World Bank Blog, Aug 16 2016 | Richard H. Thaler is a world-renowned behavioral economist and professor of finance and psychology. Recently, he was interviewed by The Economist. The discussion covers some of the fundamental studies in the field,…

The use of ‘behavioural insight’ techniques in public policy is entering the mainstream, a new report from the OECD argues, and the next step is to use them to influence organisational behaviour inside public institutions. Governments are increasingly using behavioural insights – a practice combining psychology and economics – to design policies and regulations around a realistic understanding of human behaviour traits, rather than assuming that people will behave ‘rationally’ in ways that maximise their income or wellbeing. So far, the report says, the application of behavioural insights has mostly focused on end users and consumers – ‘nudging’ them into making better financial decisions, for example, or healthier food choices. But the OECD argues that these techniques could also be applied to regulated firms or governments themselves, nudging civil servants into working together on cross-cutting agendas such as diversity, open government or good regulatory practice.

The Undoing Project: A Friendship That Changed Our Minds - Kindle edition by Michael Lewis. Download it once and read it on your Kindle device, PC, phones or tablets. Use features like bookmarks, note taking and highlighting while reading The Undoing Project: A Friendship That Changed Our Minds.

Which is smarter—your head or your gut? It’s a familiar refrain: you’re getting too emotional. Try and think rationally. But is it always good advice? In this surprising book, Eyal Winter asks a simple question: why do we have emotions? If they lead to such bad decisions, why hasn’t evolution long since made emotions irrelevant? The answer is that, even though they may not behave in a purely logical manner, our emotions frequently lead us to better, safer, more optimal outcomes. In fact, as Winter discovers, there is often logic in emotion, and emotion in logic. For instance, many mutually beneficial commitments—such as marriage, or being a member of a team—are only possible when underscored by emotion rather than deliberate thought. The difference between pleasurable music and bad noise is mathematically precise; yet it is also something we feel at an instinctive level. And even though people are usually overconfident—how can we all be above average?—we often benefit from our arrogance. Feeling Smart brings together game theory, evolution, and behavioral science to produce a surprising and very persuasive defense of how we think, even when we don’t.

“ White House releases report on applying behavioral science to government policy The White House’s Social and Behavioral Sciences Team (SBST), a subgroup of the Office of Science and Technology Policy that has been working to make government more effective, recently released its second report. This might seem like quiet, behind-the-scenes-work, but it can make a…”
Via Alessandro Cerboni

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